India October Manufacturing PMI slips to 8-month low at 55.5

India’s manufacturing activity slipped to 55.5 in October as compared to 57.5 in September. The seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ IndexTM
(PMI) signaled an improvement in the health of the sector for the twenty-eighth month in a row. The latest reading was above its longrun average of 53.9, but slipped
from 57.5 in September to signal the slowest rate of expansion since February. “There were substantial, albeit slower, increases in total new orders, production, exports,
buying levels and stocks of purchases. Hiring activity faded and business confidence slipped to a five-month low. Meanwhile, cost pressures intensified, while output
price inflation receded,” S&P Global said. Pollyanna De Lima, Economics Associate Director, S&P Global Market Intelligence, said, “India’s manufacturing sector generated
substantial growth in October, despite a challenging global economic environment. Still, insights from surveyed purchasing managers pointed to the deceleration of several measures.”
Output increased further at the start of the third fiscal quarter, stretching the current sequence of expansion to over two years. The upturn was linked by firms to
positive market conditions and healthy intakes of new work. Meanwhile, growth eased to an eight-month low, however, weighed by competitive pressures
and weak demand at some plants. Granular data highlighted a particularly marked slowdown in the consumer goods sub-sector. “The survey’s new orders index
slipped to a one-year low, as some firms raised concerns about the current demand picture for their products. Consumer goods were behind most of the slowdown,
recording considerably softer increases in sales, production, exports, input inventories and buying levels. Growth of all of the aforementioned variables was led by capital goods makers which,
with the exception of new orders, registered accelerated rates of expansion,” said Pollyanna De Lima. “We saw further indication of broadly stable inflationary forces across the manufacturing industry. It appears that a moderate increase in input costs was simply passed on to clients. Nonetheless, qualitative evidence from the future output question revealed
an interesting finding, as reports of rising inflation expectations were expected to dent demand and subsequently production growth over the course of the coming 12 months,” Pollyanna De Lima
further added. Although a further increase in new orders was a positive development, October data signaled a deceleration in growth since September, the report said. Anecdotal evidence suggested that subdued demand for certain products and fierce competition stymied the upturn. The rate of expansion was the softest in a year, with consumer goods especially affected. As was the
case for total new orders, growth of international sales remained historically strong despite losing momentum in October. The rise was the weakest in four months. Those firms that experienced an
increase in new orders from abroad reported gains from Asia, Europe, the Middle East and the US. S&P Global said that with fewer than 4 per cent of companies hiring extra staff and
95 per cent leaving workforce numbers unchanged, the rate of job creation was slight and the slowest since April. Price trends, it added, were also mixed. Both input costs and output
charges increased, but inflation of the former accelerated while factory gate charges rose to a weaker extent. When listing materials that had increased in price, firms mentioned
aluminium, chemicals, leather, paper, rubber and steel.

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